Tyson shares fall as beef costs rise and demand for chicken slacks

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Shares of Tyson Foods (TSN) fell 6% on Monday after the company missed estimates in its latest quarterly earnings report.

Adjusted earnings per share of $0.85 fell 70% year over year, well below expectations of $1.33. Revenue slightly exceeded expectations of $13.52 billion, with $13.26 billion reported. Speaking to analysts, CEO and President Donnie D. King said, “Market dynamics and some operational inefficiencies had an impact. [our] Profitability,” in the fiscal results of the first quarter.

Consumers are buying less protein, including chicken, beef and pork. This change in consumer behavior resulted in price reductions for many products, resulting in Tyson Foods paying more and offering more while consumers paid less due to weaker demand.

“Volume increases of 2.9% were aided by improved staffing for higher throughput, while the average selling price decreased 8.5% due to weaker domestic demand for beef,” said John R. Tyson, CFO of Tyson Foods, on the company’s company conference call.

Beef sales for the Mega Food Processor were $4.7 billion, down 5.6% year over year.

WASHINGTON, DC – APRIL 28: A man shops in the meat aisle of a grocery store, April 28, 2020 Washington, DC. Meat industry experts say beef, chicken and pork may be in short supply in the United States as many meat processing plants have been temporarily shut down due to the coronavirus pandemic. Tyson Foods took out a full-page ad in several major US newspapers over the weekend, warning that the food supply chain was on the verge of collapse. (Photo by Drew Angerer/Getty Images)

Higher cattle costs of $530 million also hit the company.

“We saw higher cattle prices as cattle herd numbers continued to decline. We will continue to monitor the value of beef trimmings and align our offering with customer demand at a time of tighter margins while driving volume growth in case-ready and branded products premium,” said Chief Financial Officer John Tyson.

However, Tyson Foods remains bullish on beef.

However, Tyson remains bullish on beef. “We have reason to believe in our long-term outlook for beef. This outlook is supported by our investments in strategic supplier relationships that offer higher quality beef, growing global demand, particularly in Asia, and the strengthening of discount credits and opportunities to our beef products move up the value pyramid.”

The pork was also in the last quarter. Revenue in that segment fell 6% to $1.5 billion. The average selling price of pork increased by 1.4% while the volume decreased by 7.4%.

Chicken sales hit a record high of $4.3 million, up 9.6% year over year. An increase in volume of 2.5% and a price advantage of 7.1% led to higher sales.

However, CEO King said “a few different things didn’t go as planned” with his chicken segment.

“Most importantly, the demand did not appear in the parts of the market where we expected. As a result, we had to move things, and we experienced higher costs, a lower price environment, and side effects from a network perspective.”

For fiscal 2023, the company maintained its guidance for total company revenue of $55 million to $57 billion, implying revenue growth of 3% to 7%. Tyson Foods also expects future beef margins “to be in a normalized range of 5% to 7% over the long term, but due to “current market dynamics” the company has changed this to 2% for 4%.

It also reduced its pork margin guidance to 0% to 2%. “Contrary to the normal seasonality for our pork segment, we expect the back half of the year to exceed the first half,” he said.

Shares of Tyson Foods are down more than 31% year over year.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected]

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